Last year, after several years, term deposits or deposits became relevant again, because when the European Central Bank increased interest rates, deposit interest rates also began to rise. The majority of respondents, or 43% of Latvian residents, do not plan to deposit their funds in a time deposit or have not thought about it (17%), according to a survey conducted by Luminor banka.* However, those residents who have such an interest would like to deposit for longer terms.
Every tenth respondent (10%) has either decided to deposit money or thought about making a time deposit, but has not yet made a decision, while 6% are still monitoring the situation in the market and waiting for a rise in rates. The survey shows that the desire to make a term deposit is equal in all age groups.
“Although the habit of citizens to make savings is improving every year, a large part still does not set aside money for unexpected events. The reasons are different – others do not have enough funds to postpone, and some have not developed the habit of saving. Since the autumn of last year, there has been an increasing interest of customers in time deposits, which can be explained by the desire to earn through investments, however, it is still low. In general, public awareness of this type of deposit is still relatively low, but term deposits are a good way to postpone for a specific purpose when funds are not needed immediately, but after a certain period of time. In this way, keeping savings in a separate account that is not available for a certain period of time reduces the risk of accidentally spending it for some other purpose or for daily needs,” explains Ekaterina Ziniča, head of Luminor’s business development.
More people want to invest for a longer term, where they can earn up to 2.5% per year
Of those who are considering making a term deposit, the majority, or 72%, would like to make a deposit for a longer term of 1 to 5 years. 43% would like to save the money for a year, almost a third – for a longer term of up to 5 years. Only 6% consider depositing for 3 or 6 months. Residents over the age of 50 more often want to make deposits for a year, while for 3 or 6 months those who actively work with their savings in various instruments, for example, by investing.
“According to the survey, of those residents who have not yet decided to make a time deposit, almost every third (29%) would decide in favor of saving if the interest rate reached 2 to 3%. Following market changes and developments in the world and the economy, as well as observing customers’ interest in time deposits, we have increased rates for medium and long-term deposits so that citizens have additional opportunities to increase the value of their money in conditions of high inflation,” says J. Ziniča.
The yield on deposits increases
Following the financial market situation and demand, Luminor banka has revised and raised the term deposit deposit rates. It has been increased to 1.5% for deposits for 6 months, 1.5% for deposits for 9 months, 2% for deposits for 12 months, and 2.5% for deposits for 2 years.
*Luminor Bank’s population survey was conducted in March 2023 in cooperation with research agency Norstat Latvia, surveying 1,007 respondents in Latvia aged 18 to 74.